Mad Money Recap

Return to Article

Cramer's 'Mad Money Recap': Emerson's New Tech Look

TheStreet.com Staff

Click here for an archive of Cramer's "Mad Money" recaps.

"Why trade in fads when you can invest in long standing greatness?" Jim Cramer asked viewers of his "Mad Money" TV show Monday.

He said that he's tired of hearing about the Blackberry and the recently released Grand Theft Auto 4 video game. Cramer said he's more interested in what really matters to the U.S. economy.

On that note Cramer recommended Emerson Electric (EMR), calling the company "one of the top five best manufacturers in the world."

Emerson, he said, is one of only a handful of innovative industrial manufacturers committed to giving the world the products it needs. "Emerson makes money in good times, and in bad," he said.

Cramer said he liked Emerson's portfolio of products including its industrial automation, network power systems, appliances and tools, and climate control systems. He said the whole company is firing on all cylinders, making the products the world needs.

Cramer last recommended Emerson on Aug. 24, 2007 at $47 a share. Since then, the stock is up a brisk 19%. Despite recent gains, Cramer said Emerson is still cheap. The company derives 52% of its revenue from overseas, with 30% of its revenue now coming from emerging markets.

Emerson estimates free cash flow from operations to be $2.4 billion in 2008, and Cramer said at least part of that money is likely to be returned to shareholders.

The company has a 2.2% dividend yield, which it has raised an incredible 51 years in a row, and also sports a stock repurchase program of 86 million shares or 11% of the company's current shares outstanding.

Cramer noted that Emerson trades at just 16 times its estimate 2009 earnings, despite its 15% long-term growth rate. He said the company is trading at a discount from where it should be trading.

An IPO Gem

In his "Know you IPO" segment, Cramer recommended shares of Colfax (CFX), which just went public on May 8.

He said the company is one of the few pure-plays in the fluid management business, an industry that gets little attention but is vital to the new U.S. economy.

Colfax makes pumps and fluid management products for a multitude of bull-market industries, including oil and gas, oil refining, energy and power plants, and chemical production.

He liked the company's diversification, with 44% of the company's sales from general industrial, 24% from commercial marine, 15% from oil and gas, 11% from power generation and 6% from the U.S. Navy.

Cramer compared the new Colfax to Flowserve (FLS) and Robbins & Myers (RBN), two other fluid management companies.

Flowserve, he noted, has risen from around $80 this past January, to as high as $123 on Monday. Robbins & Myers' stock has risen from just $24 in September, 2007 to $42 on Monday. Given these valuations, Cramer predicted Colfax could see as much as a 26% gain if it were to catch up to the valuation of its peers.

Cramer also liked Colfax's international exposure, noting 76% of its sales now come from overseas. He also noted the involvement of the Rales brothers in the company, saying their 44% stake in the company should be money in the bank.

Cramer advised viewers to wait at least a week before picking up shares of Colfax. He cautioned investors to not purchase the shares after hours and not to pay over $21 a share.

Riding on Wind Power

Cramer proclaimed that 2009 will be the year of wind power and recommended Owens Corning (OC) as his favorite wind power stock.

Cramer said that Owens Corning, often thought of as just a supplier of insulation, is transforming itself into a great global manufacturer of alternative energy components. The company now has a glass-fiber composites business that accounts for 33% of its sales.

Cramer said the glass composites business combines glass fibers with other materials to make incredibly strong and flexible substances for wind turbines, among other applications.

According to a recent Department of Energy report, up to 20% of the U.S. energy supply could be generated by wind power by 2030. This shift would constitute a $43 billion investment in wind power.

Cramer noted one potential pitfall with Owens Corning is that 40% of its sales are still tied to the US housing market, but he feels that the bad news from this segment has already been priced into the stock.

He said that Owens is no longer tied to this industry and is instead transforming itself into a non-cyclical company. "This stock is a winner," he said, "even if U.S. housing stays in the dumps."

Mad Mail

In this segment, Cramer told a viewer that he'd rather own a Harley Davidson (HOG) motorcycle, than the company's stock.

He told a second viewer that he still likes Allegan (AGN).

In the shipping industry, Cramer said he still likes Frontline (FRO) and Nordic American (NAT).

Final Note

Cramer told viewers not to sell Foster Wheeler (FWLT) in lieu of the strong earnings reported by Fluor (FLR). The former is a stock which he owns for his Action Alerts PLUS portfolio.

Lightning Round

Cramer was bearish on Blockbuster (BBI), Intuitive Surgical (ISRG), GeoEye (GEOY), Clearwire (CLWR) and Circuit City (CC).

Want more Cramer? Check out Jim's rules and commandments for investing by clicking here.

For more of Cramer's insights during the Lightning Round, click here.